Dollar?s Current Bull Leg Strongest since Rally Through Crisis

Date

10/1/2014 7:39:01 AM

(MENAFN- DailyFX) DailyFX.com - r>

Talking Points:

Dollar’s Current Bull Leg Strongest since Rally Through Crisis
Euro Stumbles as Inflation Data Raises the Stakes for ECB Thursday
Japanese Yen: Japan Inc Says Concerned Over Low Currency

Dollar’s Current Bull Leg Strongest since Rally Through Crisis

" style="text-align:justify"> With Tuesday’s close the Dow Jones FXCM Dollar Index (ticker = USDollar) matched its run two weeks ago. If we close the upcoming session green it will be the longest string of gains for the benchmark currency since September 2008 – the height of the financial crisis. The comparison doesn’t just stop with this particular leg of its incredible climb. Over the past three months the greenback has surged on a 700 pip run that now finds us at four-year highs. Is demand for the currency now truly as strong as it was during the height of the worst global economic and financial crunch in modern history Unlikely.

" style="text-align:justify"> The epic climb from the Dollar through 2008 was far grander in scale even though it was driven by a singular appetite: liquidity. When the interest is something as elemental as access to the market nothing else matters. In its current state the currency is certainly finding traction; but it does so through a number of complementary venues. And none of them are particularly robust enough to ensure a climb through the foreseeable future. As a safe haven we are still in a controlled burn with some areas coming under more serious pressure (High Yield and Emerging Market) while complacency still rules benchmarks like global equities.

" style="text-align:justify"> Rate expectations are the primary source of this current run but that well is not particularly deep. A contrast to an increasingly accommodative Europe China and Japan can only supply so much indirect strength for the Dollar. Its own rate forecasts needs to climb to bolster its carry returns – while appetite for historically-thin yield throughout the broader markets keeps buoyant. From two-year Treasury yields and Fed Funds futures; there has been little progress in pricing an aggressive hawkish policy. Furthermore Monday’s PCE inflation indicator and a consistent drop in breakeven rates offer limited potential for a build in the near future. It is against this disparate rate forecast that we head into today’s top event risk. The ISM Manufacturing survey for September is an important measure of economic growth but it’s the ADP employment change that will speak to primary concerns. A weak showing here will set unfavorable expectations for Friday’s NFPs.

Euro Stumbles as Inflation Data Raises the Stakes for ECB Thursday

We were reminded why the Euro has been on the chopping block this past session with event risk that speaks directly to the European Central Bank’s (ECB) accommodative monetary policy stance. While the Germany employment statistics this past session were headline worthy it was the Eurozone’s unemployment rate and inflation figures that waded into the deeper currents. An 11.5 percent unemployment rate (not far from record highs) and a 0.7 percent core CPI (matching record lows) is added justification for the central bank to push forward with the asset purchase program it announced at its last meeting. The market is certainly positioning itself in anticipation of the details for this effort to be released Thursday after the rate decision. That presents a considerable scenario risk should the ECB not deliver…

Japanese Yen: Japan Inc Says Concerned Over Low Currency

Three years ago Japanese officials decried the record high level of the Japanese yen saying that it was an undue burden on their country. Eventually the effort to devalue the currency took root and we find ourselves today with USDJPY trading above 110. A weaker currency is generally considered an advantage – particularly for an export heavy economy. However there are detriments to it as well. And those disadvantages are starting to show through. Nikkei quoted a survey from the Japanese Chamber of Commerce and Industry that reported 80 percent of companies polled said the current exchange rate is undesirable. Will the government up its game to reverse its own effort

British Pound Starting to See the Strong Economic Signs Again

In the months leading up to the fear inherent in the Scottish Referendum the British Pound was already in retreat. A moderation in the market’s position on rate forecasts showed bulls overshot the bounds of a reasonable pace for the BoE. Yet how much excess premium was there to work through. Data will help define market balance. Recently we have a final 2Q GDP reading that upgraded its initial print and a Deloitte poll showing businesses’ risk appetite was building. Today we will see if the manufacturing PMI will offer a clear proxy to 3Q GDP forecasts.

Canadian Dollar Drops after GDP Data Shows Economy Stagnated

The Canadian Dollar dropped against most of its major counterparts this past session after Stats Canada reported July GDP unexpectedly stagnated. This slowed the year-over-year pace more sharply than expected (2.5 percent) and further downgrades the currency’s position as a carry candidate. Today we have a September manufacturing report from the RBC to offer another push.

Emerging Market Suffer Worst Month Since January Russia Contemplates Capital Controls

" style="text-align:justify"> September saw a 7.8 percent drop from the MSCI Emerging Market ETF – the first and biggest decline since January. While broader risk aversion has yet to sink in this group is far more sensitive to speculation on policy changes – particularly those of the Fed. These groups aren’t likely to just sit through the tumult though. The Ruble has dropped below a level officials previously said would trigger capital controls.

Gold Sold into the Quarter End

It was an unfavorable ending to the quarter for metals. Gold slipped further to end the day at its lowest point in 2014 on the worst monthly decline (6.2 percent) since the incredible June 2013 plunge. Meanwhile the final day of the trading month and quarter was a little more dramatic for Copper (down 1.6 percent) and Silver (tumbling 3.0 percent to a fresh four-and-a-half year low).

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ECONOMIC DATA

" style="text-align:center"> GMT	" style="text-align:center"> Currency	" style="text-align:center"> Release	" style="text-align:center"> Survey	" style="text-align:center"> Previous	" style="text-align:center"> Comments
" style="text-align:center"> 23:30	" style="text-align:center"> AUD	AiG Performance of Manufacturing Index (3Q)		" style="text-align:center"> 47.3	Has been declining this summer
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Large All Industry Capex (3Q)	" style="text-align:center"> 7.00%	" style="text-align:center"> 7.40%	All of these measures have been rising. The strength of the economy will be watched by Japan’s government as further potential sales tax hikes are discussed. It will be watched by the BOJ when deciding on monetary policy
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Small Non-Manufacturing Index (3Q)	" style="text-align:center"> -1	" style="text-align:center"> 2
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Large Manufacturers Index (3Q)	" style="text-align:center"> 10	" style="text-align:center"> 12
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Non-Manufacturing Index (3Q)	" style="text-align:center"> 17	" style="text-align:center"> 19
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Large Manufacturers Outlook (3Q)	" style="text-align:center"> 13	" style="text-align:center"> 15
" style="text-align:center"> 23:50	" style="text-align:center"> JPY	Tankan Non-Manufacturing Outlook (3Q)	" style="text-align:center"> 18	" style="text-align:center"> 19
" style="text-align:center"> 00:00	" style="text-align:center"> AUD	RPData/Rismark House Px (MoM) (SEP)		" style="text-align:center"> 1.1%	A Volatile measure
" style="text-align:center"> 1:00	" style="text-align:center"> CNY	Manufacturing PMI (SEP)	" style="text-align:center"> 51	" style="text-align:center"> 51.1	Manufacturing has been in expansion so far this year.
" style="text-align:center"> 1:30	" style="text-align:center"> AUD	Retail Sales s.a. (MoM) (AUG)	" style="text-align:center"> 0.4%	" style="text-align:center"> 0.4%	Volatile measure
" style="text-align:center"> 1:35	" style="text-align:center"> JPY	Markit/JMMA Japan Manufacturing PMI (SEP F)		" style="text-align:center"> 51.7	This is a revision of the PMI data that came out earlier this month
" style="text-align:center"> 5:00	" style="text-align:center"> JPY	Vehicle Sales (YoY) (SEP)		" style="text-align:center"> -5.0%	It has been contracting this year.
" style="text-align:center"> 6:30	" style="text-align:center"> AUD	Commodity Index (SEP)		" style="text-align:center"> 91.7	Prices have been trending lower this year. The lower trend might put pressure on the RBA to continue to keep lower interest rates
" style="text-align:center"> 6:30	" style="text-align:center"> AUD	RBA Commodity Index SDR (YoY)(SEP)		" style="text-align:center"> -11.5%
" style="text-align:center"> 7:30	" style="text-align:center"> CHF	Purchasing Managers Index (SEP)	" style="text-align:center"> 52	" style="text-align:center"> 52.9	Has been above fifty this whole year
" style="text-align:center"> 7:45	" style="text-align:center"> EUR	Markit/ADACI Italy Manufacturing PMI (SEP)	" style="text-align:center"> 49.5	" style="text-align:center"> 49.8	PMI has been declining this year.
" style="text-align:center"> 7:50	" style="text-align:center"> EUR	Markit France Manufacturing PMI (SEP F)	" style="text-align:center"> 48.8	" style="text-align:center"> 48.8	All of these measures are revisions of the previous PMI figures.
" style="text-align:center"> 7:55	" style="text-align:center"> EUR	Markit/BME Germany Manufacturing PMI (SEP F)	" style="text-align:center"> 50.3	" style="text-align:center"> 50.3
" style="text-align:center"> 8:00	" style="text-align:center"> EUR	Markit Eurozone Manufacturing PMI (SEP F)	" style="text-align:center"> 50.5	" style="text-align:center"> 50.5
" style="text-align:center"> 8:30	" style="text-align:center"> GBP	Markit UK PMI Manufacturing s.a. (SEP)	" style="text-align:center"> 52.7	" style="text-align:center"> 52.5	The PMI has been rising this year. GDP has been strong expanding at 3.2% Y/Y in 2Q. A Strong PMI might add to pressures to the BOE to tighten monetary policy.
" style="text-align:center"> 11:00	" style="text-align:center"> USD	MBA Mortgage Applications (SEP 26)		" style="text-align:center"> -4.1%	A volatile measure
" style="text-align:center"> 12:15	" style="text-align:center"> USD	ADP Employment Change (SEP)	" style="text-align:center"> 207K	" style="text-align:center"> 204K	Monetary policy is hinged upon on the performance of the labor market. If the ADP report shows a strong labor market more pressure would be on the Fed to tighten monetary policy
" style="text-align:center"> 13:30	" style="text-align:center"> CAD	RBC Canadian Manufacturing PMI (SEP)		" style="text-align:center"> 54.8	Has been rising this year. A strong PMI might put pressure on the BOC to tighten policy.
" style="text-align:center"> 13:45	" style="text-align:center"> USD	Markit US Manufacturing PMI (SEP F)	" style="text-align:center"> 57.9	" style="text-align:center"> 57.9	Revision of the last PMI
" style="text-align:center"> 14:00	" style="text-align:center"> USD	ISM Manufacturing (SEP)	" style="text-align:center"> 58.5	" style="text-align:center"> 59	The PMI has shown that manufacturing has been expanding this year.
" style="text-align:center"> 14:00	" style="text-align:center"> USD	ISM Prices Paid (SEP)	" style="text-align:center"> 57	" style="text-align:center"> 58
" style="text-align:center"> 14:00	" style="text-align:center"> USD	Construction Spending (MoM) (AUG)	" style="text-align:center"> 0.5%	" style="text-align:center"> 1.8%	Has been declining since June

" style="text-align:center"> GMT	" style="text-align:center"> Currency	" style="text-align:center"> Upcoming Events & Speeches
" style="text-align:center"> 11:00	" style="text-align:center"> GBP	BOE’s Financial Policy Committee Published Statement
" style="text-align:center"> 17:00	" style="text-align:center"> GBP	BOE’s Forbes Speaks at Even In London

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses visit our Pivot Point Table

" style="text-align:center"> CLASSIC SUPPORT AND RESISTANCE

" style="text-align:center"> EMERGING MARKETS 18:00 GMT						" style="text-align:center"> SCANDIES CURRENCIES 18:00 GMT
" style="text-align:center"> Currency	" style="text-align:center"> USD/MXN	" style="text-align:center"> USD/TRY	" style="text-align:center"> USD/ZAR	" style="text-align:center"> USD/HKD	" style="text-align:center"> USD/SGD	" style="text-align:center"> Currency	" style="text-align:center"> USD/SEK	" style="text-align:center"> USD/DKK	" style="text-align:center"> USD/NOK
" style="text-align:center"> Resist 2	" style="text-align:center"> 14.0100	" style="text-align:center"> 2.3800	" style="text-align:center"> 12.7000	" style="text-align:center"> 7.8165	" style="text-align:center"> 1.3650	" style="text-align:center"> Resist 2	" style="text-align:center"> 7.5800	" style="text-align:center"> 5.8950	" style="text-align:center"> 6.7400
" style="text-align:center"> Resist 1	" style="text-align:center"> 13.5800	" style="text-align:center"> 2.3000	" style="text-align:center"> 11.8750	" style="text-align:center"> 7.8075	" style="text-align:center"> 1.3250	" style="text-align:center"> Resist 1	" style="text-align:center"> 7.3285	" style="text-align:center"> 5.8475	" style="text-align:center"> 6.5135
" style="text-align:center"> Spot	" style="text-align:center"> 13.3930	" style="text-align:center"> 2.2618	" style="text-align:center"> 11.2060	" style="text-align:center"> 7.7538	" style="text-align:center"> 1.2697	" style="text-align:center"> Spot	" style="text-align:center"> 7.2098	" style="text-align:center"> 5.8372	" style="text-align:center"> 6.3980
" style="text-align:center"> Support 1	" style="text-align:center"> 13.0300	" style="text-align:center"> 2.0700	" style="text-align:center"> 10.2500	" style="text-align:center"> 7.7490	" style="text-align:center"> 1.2000	" style="text-align:center"> Support 1	" style="text-align:center"> 6.7750	" style="text-align:center"> 5.3350	" style="text-align:center"> 6.3145
" style="text-align:center"> Support 2	" style="text-align:center"> 12.8350	" style="text-align:center"> 1.7500	" style="text-align:center"> 9.3700	" style="text-align:center"> 7.7450	" style="text-align:center"> 1.1800	" style="text-align:center"> Support 2	" style="text-align:center"> 6.0800	" style="text-align:center"> 5.2715	" style="text-align:center"> 6.1300

" style="text-align:center"> INTRA-DAY PROBABILITY BANDS 18:00 GMT

" style="text-align:center"> \CCY	" style="text-align:center"> EUR/USD	" style="text-align:center"> GBP/USD	" style="text-align:center"> USD/JPY	" style="text-align:center"> USD/CHF	" style="text-align:center"> USD/CAD	" style="text-align:center"> AUD/USD	" style="text-align:center"> NZD/USD	" style="text-align:center"> EUR/JPY	" style="text-align:center"> Gold
" style="text-align:center"> Res 3	" style="text-align:center"> 1.2850	" style="text-align:center"> 1.6421	" style="text-align:center"> 109.56	" style="text-align:center"> 0.9547	" style="text-align:center"> 1.1181	" style="text-align:center"> 0.8873	" style="text-align:center"> 0.8008	" style="text-align:center"> 139.63	" style="text-align:center"> 1245.51
" style="text-align:center"> Res 2	" style="text-align:center"> 1.2825	" style="text-align:center"> 1.6394	" style="text-align:center"> 109.33	" style="text-align:center"> 0.9526	" style="text-align:center"> 1.1159	" style="text-align:center"> 0.8851	" style="text-align:center"> 0.7987	" style="text-align:center"> 139.35	" style="text-align:center"> 1239.83
" style="text-align:center"> Res 1	" style="text-align:center"> 1.2801	" style="text-align:center"> 1.6367	" style="text-align:center"> 109.10	" style="text-align:center"> 0.9506	" style="text-align:center"> 1.1137	" style="text-align:center"> 0.8830	" style="text-align:center"> 0.7966	" style="text-align:center"> 139.08	" style="text-align:center"> 1234.16
" style="text-align:center"> Spot	" style="text-align:center"> 1.2752	" style="text-align:center"> 1.6314	" style="text-align:center"> 108.64	" style="text-align:center"> 0.9466	" style="text-align:center"> 1.1093	" style="text-align:center"> 0.8786	" style="text-align:center"> 0.7925	" style="text-align:center"> 138.53	" style="text-align:center"> 1222.81
" style="text-align:center"> Supp 1	" style="text-align:center"> 1.2703	" style="text-align:center"> 1.6261	" style="text-align:center"> 108.18	" style="text-align:center"> 0.9426	" style="text-align:center"> 1.1049	" style="text-align:center"> 0.8742	" style="text-align:center"> 0.7884	" style="text-align:center"> 137.98	" style="text-align:center"> 1211.46
" style="text-align:center"> Supp 2	" style="text-align:center"> 1.2679	" style="text-align:center"> 1.6234	" style="text-align:center"> 107.95	" style="text-align:center"> 0.9406	" style="text-align:center"> 1.1027	" style="text-align:center"> 0.8721	" style="text-align:center"> 0.7863	" style="text-align:center"> 137.71	" style="text-align:center"> 1205.79
" style="text-align:center"> Supp 3	" style="text-align:center"> 1.2654	" style="text-align:center"> 1.6207	" style="text-align:center"> 107.72	" style="text-align:center"> 0.9385	" style="text-align:center"> 1.1005	" style="text-align:center"> 0.8699	" style="text-align:center"> 0.7842	" style="text-align:center"> 137.43	" style="text-align:center"> 1200.11

--- Written by: John Kicklighter Chief Strategist for DailyFX.com

To contact John email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

" style="text-align:justify"> The information contained herein is derived from sources we believe to be reliable but of which we have not independently verified. Forex Capital Markets L.L.C.® assumes no responsibility for errors inaccuracies or omissions in these materials nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets L.L.C.® does not warrant the accuracy or completeness of the information text graphics links or other items contained within these materials. Forex Capital Markets L.L.C.® shall not be liable for any special indirect incidental or consequential damages including without limitation losses lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

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